Crypto Market July Review: BTC Hits New High, Altseason May Be Coming

In July, the crypto market showed a positive trend, with BTC breaking through a long-term consolidation area and reaching new highs, while other cryptocurrencies like Ethereum also experienced significant rebounds. This trend is driven by multiple factors, including continued accumulation by enterprises, inflows of ETF funds, and ongoing inflows of stablecoin channel funds. However, changes in expectations for interest rate cuts in the U.S. and adjustments to trade policies have also put some pressure on the market.

Bitcoin rose by 8.01% over the month, reaching a high of $120,000. This increase is supported by multiple factors, especially the growing purchasing power of enterprises. Since 2023, American investors and companies have gradually increased their allocation to crypto assets such as Bitcoin. After the new government takes office in November 2024, incorporating Bitcoin into the national strategic reserves and launching a series of crypto-friendly policies will mark a new phase for the crypto market.

However, participants in the crypto market are facing a complex situation. On one hand, BTC continues to reach new highs driven by new funds; on the other hand, other cryptocurrencies are showing weak performance, with Ethereum once falling below the price at the beginning of this bull market. However, in July, Ethereum rebounded by 48.80%, indicating that the market dynamics may be changing.

Market analysis suggests that the crypto industry is at a historic turning point. The factors influencing asset prices have undergone significant changes, shifting from the previous supply-demand cycles and speculative frenzy to a logic of comprehensive asset allocation. We are currently in the midst of a wave of tremendous industrial change.

Macroeconomic Environment: Inflation Rebound and Unexpected Employment Data

In July, the U.S. capital market was mainly influenced by three factors: expectations of a Federal Reserve interest rate cut, adjustments in trade policies, and economic data performance. The market maintained a generally bullish sentiment for most of the time, but there was a pullback after the end-of-month news exceeded expectations.

The topic of the Federal Reserve's interest rate cuts was filled with drama throughout the month. On one hand, there is political pressure to cut rates quickly, while on the other hand, the Federal Reserve insists on being data-driven. There are also divisions within the Federal Reserve, with some officials supporting a quick rate cut. After the FOMC meeting at the end of July, the probability of a rate cut in September briefly declined, but the subsequent release of employment data raised rate cut expectations again.

Most of the time, the expectations of interest rate cuts in September and strong corporate earnings drove the stock market up. After the probability of rate cuts decreased in late July, the market began to adjust. Bitcoin also fell back, with other encryption currencies dropping even more.

In terms of trade policy, the tariff adjustments announced in July exceeded market expectations, intensifying inflation concerns. The new tariff system exhibits a multi-tiered structure, implementing differentiated rates for different countries and regions.

In terms of economic data, the annual GDP growth rate for the U.S. in the second quarter was 3%, exceeding expectations. Large tech companies' earnings reports also showed AI-driven growth. However, July's non-farm payroll data was significantly below expectations, raising concerns in the market about the economic outlook.

Overall, the market in July rose under the expectations of interest rate cuts and economic optimism, but experienced a pullback at the end of the month due to tariff policies and employment data. Major stock indices still achieved gains for the month, with the Nasdaq, S&P 500, and Dow Jones Industrial Average rising by 3.7%, 2.17%, and 0.08% respectively. Bitcoin rose by 8.01%, and Ethereum rose by 48.8%.

Crypto Assets: The upward trend of Bitcoin continues, other cryptocurrencies may welcome opportunities

In July, Bitcoin opened at $107,173 and closed at $115,761, reaching a historic high of $123,231, with a monthly increase of 8.01%, a volatility of 16.9%, and a significant increase in trading volume compared to June.

From a technical perspective, Bitcoin is still operating above the 60-day moving average and the first bullish upward trend line, with monthly trading volume increasing, in a new round of upward continuation phase. The monthly MACD indicator shows that the market still has strong upward momentum.

In the contract market, the position size continued to rise from the beginning of the month to the end, indicating a strong enthusiasm for going long. However, starting from the end of the month, both the position size and funding rates have shown a significant decline, indicating that some leveraged funds have chosen to exit and hedge.

Another important event in July is the rebound signs of other cryptocurrencies. Driven by corporate purchases, Ethereum rose 48.8% in a month, and the ETH/BTC trading pair broke through technical resistance. With rising expectations for interest rate cuts and an increase in risk appetite, other cryptocurrencies are expected to have performance opportunities.

Market Structure: Long-term holders begin to reduce holdings

In July, the buying momentum prompted long-term holders to initiate the third wave of sell-offs in this bull market. Data shows that long-term holders reduced their holdings by nearly 200,000 BTC in July, including 80,000 BTC from an early wallet. Meanwhile, the positions of short-term holders rapidly increased.

Bitcoin is flowing from long-term holders to short-term holders, increasing short-term liquidity in the market, which exerts certain pressure on prices. However, the impact of early large holders' sell-offs on the market has significantly weakened compared to the past, indicating that market depth has increased.

Centralized exchanges continue to see a net outflow of Bitcoin, with over 40,000 BTC flowing out, indicating that institutional purchases are still ongoing. Institutional allocation is the direct driving force behind the rise in Bitcoin prices during this bull market.

As of the end of July, publicly traded companies directly holding Bitcoin have exceeded 4.5% of the total supply. Since the beginning of this year, the scale of institutional direct purchases of Bitcoin has surpassed that of the ETF channel, becoming the largest buyer in the market.

Capital Flow: Set a Record for the Second Largest Monthly Inflow

In July, a total of over $29.5 billion flowed into the crypto market, including $12 billion in stablecoins, $11.3 billion in Bitcoin and Ethereum ETFs, and $6.2 billion in corporate purchases. Corporate purchases became the single largest source of buying.

The inflow of $29.5 billion made July the second largest inflow month in history, providing strong support for Bitcoin to break through the long-term consolidation zone. It is worth noting that total capital inflows have increased for five consecutive months, driving Bitcoin to continue climbing from the April low and set new highs.

American companies are accelerating their allocation to BTC, and the number of participating companies is also continuously increasing. It is expected that this will continue to be an important factor driving price increases.

Additionally, in July, the inflow of Ethereum ETFs reached a historic high of $5.298 billion, approaching the $6.061 billion of Bitcoin ETFs. This reflects that as expectations for interest rate cuts heat up and encryption assets further gain popularity in the United States, more funds are beginning to flow into Ethereum. The number of companies allocating to Ethereum is also increasing, accounting for 2.6% of the total circulating supply by the end of the month. Although still lower than Bitcoin's 4.6%, the growth rate is rapid, and Ethereum's pricing power is gradually shifting from on-exchange to over-the-counter.

Outlook

Comprehensive analysis shows that Bitcoin is still in a bullish upward phase. From multiple dimensions, Bitcoin is in the relay stage of the fourth wave of this bull market, and after some fluctuations in August, it is expected to continue rising.

Other cryptocurrencies led by Ethereum are expected to see performance opportunities as interest rate cut expectations warm up and overall risk appetite increases.

The risk factors to pay attention to include changes in trade policies, US inflation, and employment data performance, among others. These factors may affect market trends.